PART 1

1. Which of the following is not an assumption of the linear breakeven model:

a. constant selling price per unit

b. decreasing variable cost per unit

c. fixed costs are independent of the output level

d. a single product (or a constant mix of products) is being produced and sold

e. all costs can be classified as fixed or variable

2. Theoretically, in a long-run cost function:

a. all inputs are fixed
b. all inputs are considered variable
c. some inputs are always fixed
d. capital and labor are always combined in fixed proportions

3. George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000.  If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.

a. 10,000 customers 

b. 20,000 customers 

c. 30,000 customers 

d. 40,000 customers 

e. 50,000 customers